Silicon Valley becomes center of mobile universe

The center of gravity for the global smartphone industry is shifting to Silicon Valley, where local companies are transforming the way people use handheld gadgets to talk, send messages and browse the Internet.

Even five years ago, the trendiest smartphone designs were coming from places like Waterloo, Ontario, home of Blackberry-maker Research In Motion, and Espoo, Finland, where Nokia is headquartered. But that changed with the 2007 launch of Apple's revolutionary iPhone, which electrified consumers with its sleek combination of touch-screen browser, music library and a seemingly infinite warehouse of downloadable "apps."

Since then, Google's Android operating system has begun catching on with manufacturers of phones, netbooks and tablet computers. Microsoft and Nokia now employ hundreds of people working on smartphones in the valley. And scores of local startups and independent application developers have formed a satellite industry that didn't exist a few years ago.

Analysts say Hewlett-Packard's move to buy the Sunnyvale phone-maker Palm is likely to fuel even more smartphone innovation in the valley, as the Palo Alto tech giant has promised to increase spending on developing and promoting new mobile gadgets based on Palm's latest software.

Advertisement

Before the iPhone, said analyst Michael Gartenberg of the Altimeter Group, smartphones were mostly sold to business customers and hard-core techies. But in 2007, he added, "Apple shifted that and they said: 'We want to sell to the mass market.' "

"Apple started the trend, and the direction is still coming from Silicon Valley," added veteran industry-watcher Rob Enderle of the Enderle Group.

Nokia and Research In Motion are still the leading manufacturers; nearly 60 percent of smartphones sold around the world in the last quarter of 2009 carried their brands, according to the market research firm iSuppli.

But figures compiled by the Gartner research firm show the percentage of phones sold with Nokia's Symbian operating system or Microsoft's Windows Mobile software is decreasing, while Apple's iPhone OS and Google's Android are both increasing their share of the market.

"Just browsing the Web on your mobile phone is a very different experience than it was three or four years ago. The market has moved forward around the whole browsing experience, and Apple and Google have both had a dramatic effect in that area," said Chris Jones, an analyst with the Canalys tech research firm.

Jones, who tracks the mobile phone industry, recently relocated from the United Kingdom to Palo Alto in part because of the concentration of companies here. He's not alone. Håkan Eriksson, chief technology officer for the Swedish telecommunications firm Ericsson, recently told journalists that he moved to his company's San Jose office because U.S. companies are at the forefront of new trends in mobile communications.

Google executive Andy Rubin said a number of technological advances, including faster processors and touch screens, were key to the advent of smartphones. But he said a major change occurred when some of Silicon Valley's biggest companies threw their weight behind taking those advances and creating dramatically new mobile products, like the iPhone and Google's Android and Palm's webOS operating systems.

"The shift that I saw — this was like four or five years ago — was that Silicon Valley started entering the mobile phone space," Rubin said. "That meant the industry was ready, the networks were ready and the whole industry was ready for that innovation to take place."

While Google has dabbled in selling its own smartphone, Rubin said the company's main goal is developing new technology that will "delight consumers" and build the audience for Google's advertising business. Google has added so many Android engineers that the group is moving to larger quarters in the Googleplex. The company says it now has more than 20,000 developers writing software applications for Android, and local developers and trade show promoters say interest in the platform is growing.

Rubin is a former executive with Danger, a Palo Alto startup that made the software for T-Mobile's popular Sidekick smartphones. Microsoft bought Danger in 2008 and folded its engineers into the group that developed a new line of phones the company introduced in San Francisco last month.

Microsoft has about 200 employees in Palo Alto who work on smartphone research and development, operations and marketing, a spokesman said.

Nokia, meanwhile, says it moved its developer outreach headquarters to Mountain View from Finland last summer, after recognizing that the valley has the richest concentration of independent software developers and companies to write smartphone applications.

"Traditionally, the lead role was in Espoo," said Purnima Kochikar, vice president of the Forum Nokia Developer Community, "which sort of tells you where we think the focus needs to be."

Nokia had previously moved its long-range research center to Palo Alto. It recently teamed with Santa Clara-based Intel to unveil open source software called MeeGo that, like Google's Android, can run on smartphones, tablets or any other mobile device.

Until this year, Palo Alto-based HP has been a minor player in the smartphone market, with its little-known line of iPaq devices aimed at the business market. But many believe that HP, the world's biggest PC manufacturer, has the clout to make Palm's new webOS software into a force in the industry.

"We think that combining HP's scale and financial strength with Palm's webOS should make a formidable platform," said analyst Bill Kreher of the Edward Jones investment firm.

HP executives have vowed to increase spending for research, development and marketing new phones and potentially netbooks and tablet computers running on webOS.

"We are going to be investing heavily in this business," said HP vice president Jim Burns.